Health-care reform

Half a loaf—or just half-baked?

A long-awaited plan

WHEN Barack Obama outlined his vision for health reform to Congress on September 9th, he insisted that any bill must cut the uninsured by 30m, cost only $900 billion and raise the federal deficit not “one dime”. The leading congressional bills thus far fail the test, but Max Baucus, the head of the Senate's powerful Finance Committee, now says he can pull this off.

After intense bipartisan negotiations, Mr Baucus (pictured) unveiled his bill on September 16th. His effort would force most Americans to obtain cover, but in return insurers must agree not to drop coverage because customers have “pre-existing conditions” or because spending caps have been reached.

To expand coverage, the plan would create internet-based marketplaces that would simplify and standardise insurance offerings. It would also offer refundable tax credits to families earning up to 400% of the federal poverty level, on a sliding scale, to help them buy insurance. Mr Baucus would also expand Medicaid, an existing health-insurance scheme for the poorest Americans, to cover more of them.

On cost, the bill appears at first blush to offer a breakthrough. The Congressional Budget Office (CBO), a non-partisan agency, claimed this week that his plan will actually reduce the federal deficit by $16 billion in 2019, and slash deficits over the subsequent decade by half a percent of GDP versus the current trend. Previous proposed health-reform bills have failed this test, with the version now pending in the House being far too expensive for Mr Obama to sign in its current form.

The agency estimates that the plan would expand coverage to some 29m currently uninsured people over the next decade, at a total gross cost of only $774 billion. And thanks to all the revenue earned by a new tax on pricey insurance plans, fees to be levied on medical industries and big cost savings to come from cuts in Medicare (the government health scheme for the elderly), these costs are supposedly more than offset.

Alas, this is too good to be true. A flaw is that the Baucus plan, like its chief rivals, does too little to fix the perverse incentives driving up health costs in the first place. Two more immediate snags may also trip it up: fuzzy maths and petty partisanship.

One problem is that some claimed savings are unrealistic. The plan assumes, for example, that payments made by Medicare to doctors will be cut by nearly 25% in 2011. Senator Judd Gregg scoffs that the “claim of deficit-neutrality is dependent on Congress's willingness to follow through on painful cuts they have been unwilling to follow through on in the past.” And the medical-devices industry is already gearing up to escape some of the $40 billion in taxes to be slapped on it.

The other obstacle is partisan bickering. Laudably, Mr Baucus has pursued a moderate course, rejecting a proposal for a government-run insurance scheme. But this and other concessions (on malpractice reform, for example) have failed to win him a single Republican endorsement thus far. Worse yet, such concessions have attracted the ire of such liberals as Senator John Rockefeller, who declared this week that the Baucus bill “will not have my vote”.

Still, it is too early to count the bill out. The full Finance Committee will consider it next week. Stephanie Herseth Sandlin, a leader of the Blue Dog coalition of conservative Democrats in the House, thinks it is “an important step forward.” And Olympia Snowe, a Republican moderate member of the committee whose vote could make all the difference, says it “moves in the right direction.” Faint praise; but an imperfect bill's saving grace may be the fact that it is better than the alternatives.